Utica-shale wells going gangbusters

Thursday

Sep 29, 2011 at 12:01 AMSep 29, 2011 at 12:47 PM

Chesapeake Energy is reporting substantial production of natural gas and oil from four of its wells in the Utica shale, the first announcement of its type related to this largely untapped resource that covers much of Ohio.

Dan Gearino, The Columbus Dispatch

Chesapeake Energy is reporting substantial production of natural gas and oil from four of its wells in the Utica shale, the first announcement of its type related to this largely untapped resource that covers much of Ohio.

The greatest output was at a well in Harrison County, about 120 miles east of Columbus. That well is yielding daily averages of 9.5 million cubic feet of natural gas and 1,425 barrels of natural-gas and oil liquids.

Aubrey McClendon, Chesapeake’s CEO, said in a statement yesterday that the company had “very strong initial drilling results.”

Chesapeake also has two wells in Carroll County, in the same part of the state. The first is producing an average of 3.1 million cubic feet of natural gas and 1,015 barrels of natural-gas and oil liquids daily. The second is producing 3.8?million cubic feet and 980 barrels daily.

In addition, Chesapeake has one Utica well in Beaver County, Pa., that is yielding 6.4 million cubic feet of gas, with no report about liquids.

With that level of output, oil and gas producers could pay off their investment on a new well in two to three months, which is unheard of in Ohio, said Robert Chase, chairman of the petroleum-engineering department at Marietta College.

“Usually, if you can get your money back in two to three years, you’re doing well,” he said.

?The resources are being extracted using a process known as hydraulic fracturing, or “fracking,” which critics say can lead to pollution. But last week, at Gov. John Kasich’s energy conference, McClendon and other industry leaders underscored their belief that fracking is safe. The process costs more than developing a conventional well, but the income potential per well is much higher.

This week, the Dispatch presented a three-day series about some of the issues raised by Ohio’s burgeoning shale-gas industry, including environmental concerns and the influence of big energy producers such as Chesapeake.

Chesapeake, a publicly traded company based in Oklahoma City, saw its share price rise 5 percent yesterday morning on the announcement, one of the market’s largest gains. Share prices lost their gains during the day, with shares closing down

41 cents, or 1.5 percent, at $27.27.

?Political and business leaders have high hopes for the Marcellus and Utica shale formations, which are much farther underground than conventional wells typically are drilled. The Marcellus shale is mainly in eastern Ohio, while the Utica reaches all the way to central Ohio.

A conventional well in the Appalachian basin of Ohio might produce about 100,000 to 500,000 cubic feet of gas per day, while the kind of well used in the Marcellus and Utica shale is expected to produce an average of 2 million to 10?million cubic feet per day, according to a report from the Ohio Department of Natural Resources’ Division of Geological Survey.

This past summer, Chesapeake was the first company to report that it had successfully completed a well in the Utica shale, which can be found thousands of feet below ground. This latest announcement would seem to affirm the eye-popping forecasts of the Utica’s potential.

?The company’s announcement “creates a great deal of optimism,” said Tom Tugend, deputy chief of the ODNR. “The numbers are large.”

But the announcement is just for a small number of wells, he said. For a larger picture, he is looking ahead to March, when all oil and gas producers will file reports about their output for the previous year.

“That will be our first snapshot,” Tugend said.

Chesapeake intends to have 10 oil and gas rigs in the Utica by the end of the year, 20 by the end of 2013 and